The huge commodity resources required for the green energy transition have come into focus this year. COP26 was a bit of a damp squib, but there has been a sea change in investor sentiment, with portfolios shifting in a way that should reduce carbon emissions.
Whether the targets are sufficient and go far or fast enough is open to debate. But the direction of travel is clear. The IEA estimates that 290 GW of renewable generating capacity will have been installed this year, up 3% on 2020. In 2020, renewable energy capacity added surged by 45% y/y, mainly due to China. These new capacity additions are now the new normal, averaging 305 GW annually through to 2026 according to IEA forecasts.
The world’s attention has shifted firmly back to commodities, associated supply chains, and the critical role they will play in the renewable energy transition. Potential disruptions to supply need to be acknowledged.
In May, the IEA published a report titled: The Role of Critical Minerals in Clean Energy Transitions. The takeaway was clear: there is “a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions”.
The supply of key minerals may struggle to keep pace with the surge in demand, to meet sustainable development goals. The scale of investment required poses a challenge. By 2030, the IEA estimates that primary demand for copper, lithium, and cobalt, will be far in excess of the committed mine production for these minerals.
